Pension funds are among the most important investors within UK capital markets. Understanding how and why they invest the way they do is vital to understanding how the economy might develop in coming decades – and in determining how radical transformation within the UK economy might be financed.
In this new think-piece for the International Longevity Centre-UK, SPERI’s deputy director Dr Craig Berry surveys the evidence on pension fund investments, and recent developments in UK pensions provision, to consider the willingness and capacity among pension funds to reorient investment practice towards long term investments. The paper also evaluates recent coalition and Conservative government policies in this area, questioning whether policy has been sufficiently focused on challenging the most important barriers to investing for the long term.
Dr Berry recommends the establishment of national and local economic renewal funds to address these concerns. These would be funded by near-compulsory allocations by all workplace pension schemes. Any individual or firm would be able to bid to the fund for investment, into projects consistent with improving the productive capacity of the UK economy. He also advocates an enhanced role for the state in supporting pension funds to facilitate long term investment through its unrivalled capacity to hedge risks, including offering hypothecated investment bonds to institutional investors and providing annuities to ‘defined contribution’ savers.
Download the think-piece: Take the Long Road: Pension Fund Investments and Economic Stagnation.
Read Craig Berry’s associated blog about the report: The potential of workers’ capital in Britain’s economic renewal